Are you thinking about using revolving credit or installment credit, but don’t know what makes one better?
In this article, we will provide you with an installment credit vs revolving credit guide that details what you need to know about each credit type. After you’ve read through what each form of credit has to offer, you’ll be able to make your final decision about which type of credit to choose.
Without further ado, let’s jump into this comparative guide for everything that you need to know.
What Is Revolving Credit?
Revolving credit is when you’re allowed to continuously borrow money up to a specified amount whenever you need the funds. When you accept the terms outlined in the contract by the lender, you’ll agree to make payments back to the lender for the amount that you’ve borrowed.
This will typically be done in monthly payments until the amount has been paid back. The main difference between revolving credit and installment credit is that with revolving credit, you can borrow money multiple times.
The common types of revolving credit include:
- Retail credit cards used for discounts
- Personal credit cards
- Home equity credit lines
- Lines of credit for others that may have credit cards that share an account
What is Installment Credit?
Installment credit is a loan that you are given one time, and then once the loan amount is given, you’ve will have to begin making payments to repay the loan to the lender. The contract that you make with the lender will outline the following things:
- Your fixed interest rate
- Additional fees
- The repayment terms of your loan
It would help if you had a plan for how you would repay the loan in the future. Not paying the loan on time can lead to increased fees or other penalties because of the interest rate that you agreed to when you signed your lender-borrower agreement.
There are various reasons why someone would seek an installment loan over a revolving credit loan. For example, if you intend to purchase a car and need enough money to make a payment on the car and make car note payments, you’d apply for an installment loan.
Another reason that you might apply for an installment loan is if you need the funs to pay your home mortgage. The last thing you want to do is not have the funds to pay your bills and lose your home. If you find that you don’t have substantial credit but still need an installment loan check out possible installments here.
Installment Credit vs Revolving Credit
When you’re considering which is better installment credit vs revolving credit, it depends on what you intend to use the loan. Whichever you choose ensure you’ve got the means to make the monthly payments back to the lender, or you’ll face costly penalties.
If this article was informative, we encourage you to read some of the other articles we have featured on our site.